Cost Management, 5e Don Hansen, Maryanne Mowen, Dan Heitger
(Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All
Chapters Solutions Manual Excel files download link at the end of this file.
CHAPTER 1
INTRODUCTION TO COST MANAGEMENT
EXERCISES
Exercise 1-1
a. FS g. CMS
b. FS h. FS
c. CMS i. CMS
d. CMS j. CMS
e. FS k. FS
f. CMS l. FS
Exercise 1-2
1. Customers can be internal or external. Users of the component produced by
Barry’s department are his internal customers. This includes the Assembly
Department and the Rework Department. They are directly affected by the
quality of the product produced by Barry’s department. In a sense, those who
buy the cell phones are his customers too—after all, the functionality of the
MP3 player is affected by the quality and reliability of its components.
2. Barry’s department is producing a low-quality component. One out of every
50 units is having a high defect rate and is causing a lot of rework. Being
sensitive would require a dramatic reduction in the defect rate. A reduction in
the defect rate would decrease cycle time, lower the rework rate, and decrease
costs. These improvements in quality create the potential to increase value for
external customers and make the life of internal customers much easier. In
turn, these quality enhancements will likely help Hepworth please a key
stakeholder (customers) more consistently, thereby increasing sales and/or
decreasing quality-related costs, both of which increase Hepworth’s value over
the long term.
3. Cost management can provide information concerning quality—both financial
and nonfinancial. Defect rates can be tracked over time. Rework costs
attributable to defective components from Barry’s department can be
measured and tracked over time. Cycle time reductions due to improved quality
can be measured and reported. Product cost reductions attributable to
improved quality can be reported.
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,Exercise 1-3
a. Planning and control h. Planning and control
b. Costing of service i. Decision making
c. Costing of product/activity j. Costing of service
d. Planning and control k. Costing of an activity
e. Planning and control l. Planning and control
f. Decision making m. Decision making
g. Costing of product
Exercise 1-4
The manager is clearly considering unethical behaviors, especially the decisions
associated with reducing maintenance and promotional salaries. Extending asset
life for depreciation has less clear ethical implications. Reducing maintenance may
not hurt much in the short run but will have long-run negative financial
consequences. Furthermore, the decision for promotions has been made with a
given set of financial expectations, and reducing the salary increases by 50 percent
for deserving employees is obviously unfair to them. Although the manager is not
a cost or management accountant, he is violating the ethical standard under
integrity that requires him to “refrain from engaging in any conduct that would
prejudice carrying out duties ethically” (III-2).
The reduction in promotional salary increases is particularly egregious in that he is
reducing the salaries of others so that he may benefit. In effect, he is stealing from his
subordinates. The reduction in maintenance budget is also a form of stealing—robbing
future service potential to produce a current personal benefit.
An ethical dilemma does exist if the manager carries through with his plans. The
dilemma exists because the manager wants to manipulate income to achieve
personal financial gain. A company code of ethics and compliance monitoring is
one recommendation. An internal audit could be used to detect and deter such
questionable behavior. Furthermore, a company policy requiring managers to
justify any expenditure reductions in writing to both the employees and higher
management could discourage behavior like the manager’s. The best control,
however, is hiring managers with the integrity to do the right thing even when faced
with the opportunity to cheat or steal.
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,Exercise 1-5
1. The controller wants a written record of spoiled material in order to more
closely control it. From a behavioral perspective, the formal record keeping of
spoilage will make it seem more important to individuals on the factory floor. If
the company has a total quality management program in effect, keeping track
of spoilage can make it easier to note trends and ensure that spoilage is being
reduced over time. Additionally, the formal reporting of spoilage may make it
easier to pinpoint the areas in which spoilage occurs and may enable
management to improve the system to eliminate spoilage. Employees should
be made aware that the purpose of tracking spoilage is to eliminate it, not to fix
blame.
It is possible that everybody doesn’t know what the spoilage rate is. Some
people may think it is high; others may think it is low. A written record of
spoilage will prevent a certain amount of pointless arguing about this. For
example, the plant manager will not be forced to rely on the production
manager’s assessment of spoilage. Instead, both managers can rely on the
recorded spoilage to determine how much is occurring and how it can best be
reduced.
2. The production manager correctly sees that keeping track of spoilage is
additional work. This will cost the plant in one way or another. Even if an
additional worker need not be hired, the workers who do record spoilage, by
definition, will not be doing something else. The production manager should
work together with the controller to see that the costs of recording spoilage do
not exceed the benefits. She should also attempt to make the recording as easy
as possible and concentrate on the “expensive” spoilage. Finally, her remark
indicates that workers may hide spoilage to avoid responsibility. They may
“steal” it and then dispose of it, or they may simply pass on a bad unit to the
next process. Either approach is costly and not in harmony with the goal of
improving quality. These problems can be avoided by training, education, and
the installation of controls.
Exercise 1-6
1.P lanning. The management accountant gains an understanding of the impact on
the organization of planned transactions (i.e., analyzing strengths and weaknesses)
and economic events (both strategic and tactical) and sets obtainable goals for the
organization. The development of budgets is an example of planning.
Control and evaluation. The management accountant ensures the integrity of
financial information, monitors performance against budgets and goals, and
provides information internally for decision making. Comparing actual performance
against budgeted performance and taking corrective action where necessary is an
example of control and evaluation.
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, Exercise 1-6 (Concluded)
Continuous improvement. The management accountant helps identify
opportunities for improvement, measures the projected costs and benefits, and
reports on the actual outcomes.
Decision making. The management accountant helps in the analysis of various
alternatives and in the choice of the optimal course of action.
2. a. Planning; expected price, cost, and tax information are needed
b. Continuous improvement; cost savings from improved order entry quality
and improved customer satisfaction
c. Control and evaluation; a performance report triggered the investigation
that led to corrective action
d. Decision making; relevant cost information is needed to decide whether to
make or buy the component.
e. Decision making; accounting must analyze cost-volume-profit effects.
f. Continuous improvement; initial quality costs by category with reports
revealing their changes over time.
g. Planning; price and cost information with budgeted income statements are
needed.
h. Continuous improvement; cost information for moving and waiting
activities and finished goods inventories (e.g., carrying costs). Revenues
for the increased market share would also be needed.
Exercise 1-7
Kaylin Hepworth is a line manager with direct responsibility for producing a major
component of the plant’s products. The basic objective of the plant is to produce
speakers, and Kaylin plays a direct role in achieving this objective.
Joseph Nguyen is a line manager with direct responsibility for producing speakers.
This is the basic objective of the plant. Thus, Joseph has direct responsibility for a
basic objective and holds a line position.
Leo Tidwell is staff. He is in a support role—he prepares reports and helps explain
and interpret them. His role is to help the plant manager and other line managers
more effectively carry out their responsibilities.
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